Shenzhen's Property Market Continues to Heat up

In the 90s, property prices in Shenzhen, despite only being a river across from Hong Kong, were merely around 10% of that of its neighbour. Along with China’s and Shenzhen’s economic development over the years, the ratio of the cities’ property prices has shrunken to 1:3 in 2013 to 2014. Recently, Shenzhen’s home prices have grown significantly in 2015. And up until May this year, prices in Shenzhen have risen another 10%. On the other hand, according to the Vigers Hong Kong Property Price Index, Hong Kong’s home prices have started falling since October 2015, dropping around 9% accumulatively.

Shenzhen’s home prices in the secondary market are now, on average, HKD 5,100 per sq ft of GFA, around 50% of Hong Kong’s prices. With the gap between the two cities’ prices narrowing, some even suggested that Shenzhen’s prices may exceed Hong Kong’s in the near future.

In terms of different regions within the cities, Shenzhen’s newly developed area, Nanshan district, has the highest average home prices among Shenzhen’s administrative regions. Its average square footage price of HKD 7,500 is already higher than that of some of the districts in the New Territories of Hong Kong. For example, second-hand homes in the North District, which is just south of the border, are currently selling at HKD 6,800 per sq ft, and in Yuen Long, where many new developments are launched recently, homes in the secondary market are selling at HKD 5,800 per sq ft on average, which is more than 20% cheaper than the average price recorded in Nanshan.

Yet, an important point to note is that, prices compared above are of homes in the secondary market. As a newly developed district, properties in Shenzhen’s Nanshan are generally quite new. In contrast, second-hand homes in the New Territories of Hong Kong are much older, dragging down average transaction prices in the area. Moreover, many of the properties in Nanshan are developed as luxury properties, whereas, most of the properties in the New Territories are developed targeting a different market sector. Comparing average transaction prices in the two districts may not fully reflect the relative value of the developments. Moreover, Shenzhen’s secondary market have slowed quite substantially in recent months, especially after the launch of the 325 policies, with prices having fallen over 2% from February’s high point.

Despite Shenzhen being adjacent to Hong Kong, there are still differences in Shenzhen’s and Hong Kong’s development levels in a few areas, such as the cities’ transportation system, legal system and the cities’ respective international reputation and so on. There are also quite a significant difference between the cities’ income per capita. Despite the closing gap in property prices, investors are likely to continue to prefer properties in Hong Kong over Shenzhen’s when similar properties are concerned. It is, hence, unlikely for property prices in Hong Kong to be surpassed by Shenzhen’s in the near future.